COMMENTARY "Revenues for our third fiscal quarter were $306.3 million, an increase of $9.3 million compared to the prior quarter," said Jerry Rawls, Finisar's executive Chairman of the Board. "Revenue growth was primarily driven by the demand for 40 gigabit and 100 gigabit transceivers for datacom applications, as well as transceivers for wireless applications."

In evaluating the operating performance of Finisar's business, Finisar management utilizes financial measures that exclude certain charges and credits required by U.S. generally accepted accounting principles, or GAAP, that are considered by management to be outside Finisar's core operating results. A reconciliation of Finisar's non-GAAP financial measures to the most directly comparable GAAP measures, as well as additional related information, can be found under the heading "Finisar Non-GAAP Financial Measures" below.

Financial Statement Highlights for the Third Quarter of Fiscal 2015:

Revenues increased to $306.3 million, up $9.3 million, or 3.1%, from $297.0 million in the preceding quarter.

Sales of products for datacom applications increased by $18.5 million, or 8.5%, compared to the preceding quarter, primarily driven by the demand for 40 gigabit and 100 gigabit transceivers for datacom applications, as well as transceivers for wireless applications.

Sales of products for telecom applications decreased by $9.2 million, or 11.3%, compared to the preceding quarter, primarily due to the impact of one month of the annual telecom price reduction that typically takes effect on January 1 and the decrease in demand for transceivers for telecom applications driven by sluggish carrier capital expenditures.

GAAP gross margin decreased to 25.5% from 28.6% in the preceding quarter, primarily driven by a $5.7 million non-cash charge for the impairment of long-lived assets.

Non-GAAP gross margin decreased to 30.0% from 31.1% in the preceding quarter primarily due to the impact of one month of the annual telecom price reduction that typically takes effect on January 1 and the impact of substantial yield loss for a new optical engine product for supercomputing applications that we started to ramp in production during the quarter.

GAAP operating expenses decreased $17.6 million to $74.6 million from $92.2 million in the preceding quarter, primarily from expense reduction related to resolving patent infringement litigation that occurred in the preceding quarter.

Non-GAAP operating expenses decreased $2.2 million to $65.1 million from $67.3 million in the preceding quarter.

GAAP operating income increased $10.7 million, to $3.4 million or 1.1% of revenues, compared to an operating loss of $7.3 million or (2.4)% of revenues in the preceding quarter, primarily as the result of higher revenues and lower operating expenses.

Non-GAAP operating income increased $1.9 million to $26.9 million, or 8.8% of revenues, compared to $25.0 million, or 8.4% of revenues, in the preceding quarter, primarily as the result of higher revenue and lower operating expenses.

Cash, cash equivalents and short term investments increased $11.4 million to $488.9 million at the end of the third quarter, compared to $477.4 million at the end of the preceding quarter.

OUTLOOK

The Company indicated that for the fourth quarter of fiscal 2015 it currently expects revenues in the range of $310 to $330 million, non-GAAP gross margin of approximately 30%, non-GAAP operating margin of approximately 8% to 9%, and non-GAAP earnings per diluted share in the range of approximately $0.22 to $0.28. Please note that the fourth quarter fiscal 2015 will have 14 weeks compared to 13 weeks in the preceding quarter. However, the positive benefit to revenue of the extra week will be partially offset by the impact of Chinese New Year which occurred in February. In addition, operating expenses are expected to increase primarily due to the extra week relative to the preceding quarter.

CONFERENCE CALL

Finisar will discuss its financial results for the third quarter and current business outlook during its regular quarterly conference call scheduled for Thursday, March 5, 2015, at 2:00 pm PT (5:00 pm ET). To listen to the call you may connect through the Finisar investor relations page at http://investor.finisar.com/ or dial 877-718-5108 (domestic) or + 719-325-4773(international) and enter conference ID 3629508.

An audio replay will be available for two weeks following the call by dialing 1-888-203-1112 (domestic) or +1-719-457-0820 and then following the prompts: enter conference ID 3629508 and provide your name, affiliation, and contact number. A replay of the webcast will be available shortly after the conclusion of the call on the Company's website until the next regularly scheduled earnings conference call.

This press release contains forward-looking statement concerning Finisar's expected financial performance. These statements are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on our current expectations, estimates, assumptions and projections about our business and industry, and the markets and customers we serve, and they are subject to numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate. Finisar assumes no obligation to update any such forward-looking statements. Forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those projected. Examples of such risks include those associated with: the uncertainty of customer demand for Finisar's products; the rapidly evolving markets for Finisar's products and uncertainty regarding the development of these markets; Finisar's historical dependence on sales to a limited number of customers and fluctuations in the mix of products and customers in any period; ongoing new product development and introduction of new and enhanced products; the challenges of rapid growth followed by periods of contraction; intensive competition; and the uncertainty of achieving anticipated cost savings and synergies in connection with the recently completed u2t acquisition. Further information regarding these and other risks relating to Finisar's business is set forth in Finisar's annual report on Form 10-K (filed June 26, 2014) and quarterly SEC filings.

FINISAR FINANCIAL STATEMENTS The following financial tables are presented in accordance with GAAP.

Finisar Corporation

Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

Three Months Ended

Nine Months Ended

Three Months Ended

January 25, 2015

January 26, 2014

January 25, 2015

January 26, 2014

October 26, 2014

Revenues

$

306,283

$

294,018

$

930,902

$

850,808

$

296,981

Cost of revenues

221,173

187,368

659,183

546,638

210,625

Impairment of acquired developed technology and other long-lived assets

5,722

-

5,722

-

-

Amortization of acquired developed technology

1,435

961

4,304

3,735

1,435

Gross profit

77,953

105,689

261,693

300,435

84,921

Gross margin

25.5

%

35.9

%

28.1

%

35.3

%

28.6

%

Operating expenses:

Research and development

48,782

46,734

150,972

135,223

51,184

Sales and marketing

10,926

10,911

34,378

35,038

11,487

General and administrative

14,062

14,353

57,553

38,081

28,772

Impairment of acquired developed technology and other long-lived assets

45

-

45

-

-

Amortization of purchased intangibles

737

595

2,235

1,785

737

Total operating expenses

74,552

72,593

245,183

210,127

92,180

Income (loss) from operations

3,401

33,096

16,510

90,308

(7,259

)

Interest income

321

335

1,275

834

342

Interest expense

(2,686

)

(1,663

)

(8,687

)

(2,582

)

(2,867

)

Other income (expenses), net

2,051

(1,873

)

58

(890

)

33

Income (loss) before income taxes and non-controlling interest

3,087

29,895

9,156

87,670

(9,751

)

Provision for income taxes

1,409

2,827

4,596

4,816

1,610

Income (loss) before non-controlling interest

1,678

27,068

4,560

82,854

(11,361

)

Adjust for net loss attributable to non-controlling interest

-

(7

)

-

183

-

Net income (loss) attributable to Finisar Corporation

$

1,678

$

27,061

$

4,560

$

83,037

$

(11,361

)

Net income (loss) per share attributable to Finisar Corporation common stockholders:

Basic

$

0.02

$

0.28

$

0.05

$

0.87

$

(0.11

)

Diluted

$

0.02

$

0.26

$

0.04

$

0.82

$

(0.11

)

Shares used in computing net income per share - basic

103,563

96,394

100,475

95,649

99,621

Shares used in computing net income per share - diluted

105,990

104,361

103,825

103,491

99,621

Finisar Corporation

Consolidated Balance Sheets

(in thousands)

January 25, 2015

October 26, 2014

July 27, 2014

April 27, 2014

(Unaudited)

(Unaudited)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

198,344

$

186,952

$

287,455

$

303,101

Short-term held-to-maturity investments

290,520

290,478

209,927

209,922

Accounts receivable, net

210,116

213,721

231,312

225,020

Accounts receivable, other

41,540

34,573

41,595

33,749

Inventories

277,862

284,789

270,122

259,759

Prepaid expenses and other assets

37,265

38,065

38,582

33,022

Total current assets

1,055,647

1,048,578

1,078,993

1,064,573

Property, equipment and improvements, net

304,547

306,331

301,020

273,328

Purchased intangible assets, net

29,336

31,508

33,680

34,141

Goodwill

106,735

106,735

106,735

106,115

Minority investments

2,647

2,547

2,317

2,117

Other assets

22,444

22,528

20,907

17,272

Total assets

$

1,521,356

$

1,518,227

$

1,543,652

$

1,497,546

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

123,895

$

113,235

$

143,224

$

119,439

Accrued compensation

30,632

35,354

28,215

38,541

Other accrued liabilities

31,854

33,529

27,568

31,533

Deferred revenue

11,240

12,358

16,872

16,659

Short term debt

175

187

247

243

Current portion of convertible notes

36,665

40,015

40,015

Total current liabilities

197,796

231,328

256,141

246,430

Long-term liabilities:

Convertible notes, net of current portion

219,072

216,775

214,496

212,253

Other non-current liabilities

24,184

24,900

24,042

22,804

Total liabilities

441,052

473,003

494,679

481,487

Stockholders' equity:

Common stock

104

100

100

97

Additional paid-in capital

2,537,231

2,485,133

2,469,687

2,456,110

Accumulated other comprehensive income

(1,418

)

17,282

25,116

20,025

Accumulated deficit

(1,455,613

)

(1,457,291

)

(1,445,930

)

(1,460,173

)

Total stockholders' equity

1,080,304

1,045,224

1,048,973

1,016,059

Total liabilities and stockholders' equity

$

1,521,356

$

1,518,227

$

1,543,652

$

1,497,546

Note - Balance sheet amounts as of April 27, 2014 are derived from the audited consolidated financial statements as of the date.

FINISAR NON-GAAP FINANCIAL MEASURES

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles, or GAAP, Finisar provides the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: non-GAAP gross profit, non-GAAP operating income and non-GAAP income per share. These non-GAAP financial measures are supplemental information regarding the Company's operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or which occur relatively infrequently and which management considers to be outside our core operating results. Some of these non-GAAP measures also exclude the ongoing impact of historical business decisions made in different business and economic environments. Management believes that tracking non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income and non-GAAP net income per share provides management and the investment community with valuable insight into our current operations, our ability to generate cash and the underlying business trends which are affecting our performance. These non-GAAP measures are used by both management and our Board of Directors, along with the comparable GAAP information, in evaluating our current performance and planning our future business activities. In particular, management finds it useful to exclude non-cash charges in order to better correlate our operating activities with our ability to generate cash from operations and to exclude certain cash charges as a means of more accurately predicting our liquidity requirements. We believe that these non-GAAP measures, when used in conjunction with our GAAP financial information, also allow investors to better evaluate our financial performance in comparison to other periods and to other companies in our industry.

In calculating non-GAAP gross profit in this release, we have excluded the following items from cost of revenues in applicable periods in this release:

In calculating non-GAAP operating income in this release, we have excluded the same items to the extent they are classified as operating expenses, and have also excluded the following items in applicable periods in this release:

Gain or loss on litigation settlements and resolutions and related costs (non-recurring cash charges or benefits);